Recently, I was part of a conversation in the office about enjoying boat rides in the Mediterranean, when the conversation steered towards yachts and the high cost of not only purchasing one, but also the upkeep. The average figure being thrown around for a luxury yacht was close to € 25,000/month, which took into account fuel, crew, docking charges, etc.
People anywhere would relish the idea of owning a yacht, and even more so in the Mediterranean. However, this is where the conversation took an interesting turn. Someone said “Even if I had that kind of money, I wouldn’t spend it on buying and maintaining a yacht when I’m only going to use it a couple of weeks a year…I’d much rather rent it.”
And that sparked the thought that gave rise to today’s post. My generation, the so-called millennial generation has displayed a strong inclination towards minimalism, the concept of simplifying your life by renting, and shunning the idea of spending more and owning more. If we look around, we see examples of this everywhere:
Transportation: Younger generations increasingly prefer not buying a car. What with the cost of the vehicle, insurance, fuel, taxes, maintenance, etc. the average cost of vehicle ownership has skyrocketed over the years. Some sources put the average annual cost of car ownership in the first year at close to US$ 12,000. No wonder then, that online based taxi services like Uber, ride sharing companies like BlaBlaCar and car sharing companies like Zipcar are surging in popularity.
Home ownership: The traditional American dream of being a homeowner is still strong; however, cracks are beginning to appear. Even more so, after the global economic crises.
After seeing the impact the crises had on their parents’ generation, younger generations are a lot more skeptical of home ownership and hesitant to make such a large commitment. Instead of being tied down to a single location with a fat mortgage and a significant decrease in liquidity (from making the down payment), they prefer to have the flexibility and liquidity that come with renting.
The traditional argument that buying a home is a way of forcing yourself to save and invest no longer stands completely true. There is plenty of research out there that proves that over the long-term, property values have increased very little (if any) after adjusting for inflation. Plus if you add in closing costs and taxes, annual property taxes, legal fees, and maintenance costs over the years, the cost of your house goes up even further. There are a lot of factors that go into it, like how long you expect to live there, your mortgage interest rate, market conditions at the time of purchase and sale, etc. But the bottom line is that an increasing number of people are opting to rent, instead of purchase.
Furniture: This is a relatively new concept, but fits right into minimalism, and complements the home ownership section very well. If your rental apartment is unfurnished, you’re not okay with cheap IKEA furniture, and you want to have nice furniture without the buyer’s remorse that inevitably accompanies it once you have to move or replace it, renting good quality furniture is a great option. Websites like Cort offer ready-made move in packages you can choose from, various rental durations and professional designers to help you choose.
Lodging: Let me preface this by saying that I know this one doesn’t fit exactly into the rent vs. purchase argument, but it’s worth some consideration.
Although I personally am not a big fan of the concept, a lot of people I know use vacation rental services like Airbnb when they travel. Sometimes you rent an entire house, but more often than not, you rent a room in someone’s house. Instead of shelling out large amounts of money for a private hotel room, there are millions out there that don’t mind (and even enjoy) the experience of living in, and sharing someone else’s home in exchange for saving some money.
Clothing: Yes, you read it right! Believe it or not, people actually rent clothing, and why not? Spending hundreds and sometimes thousands of dollars on high-end brands for a special occasion, or to only be able to wear it once or twice makes no sense. Sites like Rent The Runway and LeTote allow you to wear designer clothing for special events without blowing a hole in your bank account and feeling like you wasted the money after wearing it once. Some websites even offer the services of a stylist. You can read more about these websites here.
Accessories: Exactly as in the case of clothes, you can rent high-end accessories like bags, jewelry, sunglasses, watches and vintage items. This allows you to accessorize to the hilt, without having to pay through the nose. Most clothing rental service companies also offer accessory rentals.
Media: In the past people spent money on buying movie DVDs/CDs/VHS’, or music CDs/Online MP3s. But undeniably, a growing number of millennials now prefer to rent media. If you think about it, services like Netflix and Spotify effectively allow you to enjoy movies, TV shows and music without having to purchase them. And the best part it all is that you have some of the world’s largest and best media databases available at your fingertips for a few dollars/month- that’s less than the cost of a meal at a Taco Bell.
These are just a few examples, but the list goes on. You can literally rent anything from yachts and airplanes to entire islands. There are hundreds of very successful companies in each of these sectors around the world, and more are springing up every day including peer-to-peer rental services, and each with an ever-increasing numbers of users.
The point is, although there still exist a very large number of individuals who prefer to buy, there is a significant portion of the population base, growing at a phenomenal rate, which prefers minimalism and chooses to rent. The reasons for doing so may be diverse and varied, but the end result is the same- the decision to rent, which makes me wonder whether this trend is here to stay.